Issue 24

01/19/05

A Special Prize And Mark Cuban's Insecurity

Issue #24 - A Special Prize And Mark Cuban's Insecurity

1. The Insecurity Of Mark Cuban
2. The Special Prize Inside

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Dear Friends,

Today let's discuss Social Security, one of the most misunderstood
oxymorons in modern US history. While most people would agree that it
resembles Social Insecurity, they're not really that certain why, or
how to possibly correct it.

This point was recently highlighted by a blog entry I recently read on
Mark Cuban's blog, because even an experienced businessman like Mark
can miss out on some of the most important aspects of Social Security
reform.

With my mom soon to receive her first check from the SSA and President
George W. Bush to begin pushing for reform, once the inauguration is
complete later this week, I felt that this would be a timely topic.

Before we get started however, let me first note that when I wrote
this it was still Martin Luther King Jr. Day. I find that it is
fitting that such a strong reminder of mankind's right to equal
representation through voting rights should come just 2 weeks prior to
the first ever national elections in Iraq, one of the most represive
countries over the last 30 years.

I for one am thankful that the 50 million plus citizens of Iraq are
now free to choose their leaders and thank Dr. King for his lifetime
of efforts in educating America on the fundamental right to be free to
express our equality through our ability to vote.

Later this week, we will peacefully inaugurate a peacefully elected
President for the 55th time in our history. While that is quite the
achievement, I applaud the Iraqis in their efforts to achieve Dr.
King's dream for themselves and begin the long road toward electoral
leadership in the Middle East.

We can only pray that someday soon, Egypt, Syria, Jordan, Saudi
Arabia, Iran, and the many other countries that make up the Middle
East will follow in Iraq's footsteps. After this month, the world will
finally witness the second Middle Eastern democracy, Israel and now
Iraq, who would've thunk it!

In a more direct connection to Dr. King's dream, I find it disgusting
that liberals both here and abroad find it necessary to be racist
towards the highest ranking black woman in America, Condoleeza Rice.
At least take a break in honor of Dr. King, or is that too much to ask
of Senator Boxer?

Okay, now let's pursue discrimination of the financial sort: You and I
are too stupid to handle what should be our own money anyways!

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The Insecurity Of Mark Cuban

If you read Mark Cuban's blog on Social Security, dated December 16th,
2004, then you'll know that even the very rich are nervous about both
the current state of Social Security and any potential reforms that
President Bush might have in mind.

Personally however, I believe that Mark Cuban's fears are not in the
right place and that in reality the costs of avoiding reform, or not
proposing a drastic enough solution, will create an even greater mess
further down the road. Probably at the exact wrong moment in our
economic cycle, and as a result causing even greater negative economic
consequences than we currently face.

Having spent a number of years involved in network marketing and
constantly dealing with questions regarding Ponzi schemes, I would
point to Social Security as the greatest Ponzi scheme of them all. Not
only has it duped more people, for a longer time, we continue to pay
through the nose and refuse to vote out the bums who continue to tell
us that they don't know how to properly fix it!

While I agree with Mark Cuban that politicians can not be trusted with
our money and that they will continually seek out ways of getting us
to give them more money, I believe that any attempt to get more money
out of Washington and back into our pockets is an attempt worth
supporting with all my political energy.

When it affects all of our retirements and involves the possibility of
having better returns on retirement funds, I support it even more!

Obviously, I have questions, just like everyone else, but the fact
that an effort is even being made makes me want to support it, which
is apparently the opposite of Mark Cuban's reaction.

While I want to focus on Social Security reform more than anything
else, it seems as though Mark Cuban thinks that you and I are less
able to take care of ourselves than the politicians running Social
Security. Personally, I find that thought to be even more laughable
than the possibility that Social Security might survive without
reform.

It is obvious to others, and myself as well, that the current system

doesn't protect against stupidity anyways.

In fact, you could say that I am personally a prime example of the
arguments made by Todd Zywicki in the aforementioned article. While I
have yet to receive my W-2 for last year, I took a brief glance at my
final paycheck for 2004 and realized that when compared to the
previous 2 years of full-time employment, I had taken a nearly 45%
paycut when I transferred and proceeded to launch Investing With Mom.

Granted my original place of work was closed and so my options were
limited, but I could have just gone out and got a new job, right?

Now obviously, some would argue that my decision was based in obvious
stupidity, after all didn't I realize I would replace less than 2% of
my overall income by launching Investing With Mom?

However, whenever vast numbers of people begin to realize how
dedicated I am to providing advice and insight for the smallest of
investors, just take a look at the next article in today's issue, and
as a result I begin to generate more revenue than I previously made in
all my jobs combined. Then I'm sure it could be argued that I had made
a similar choice as Bill Gates, just without about half the zeros in
my bank account.

Currently, the politicians are managing negative returns on what
amounts to a transfer system. The fact that they have been able to
achieve something so remarkable would be considered amazing, if it
didn't involve your future ability to retire in a reasonable manner.

Since all they are doing is transfering $1 dollar from payroll taxes
to $1 dollar of Social Security income checks, you would think that
they could do no worse than break even, and yet when you factor in
inflation you see the crux of the problem. They are doomed to lose
money unless they truly invest it, instead of borrowing it and then
giving retirees the revenue from the resultant bonds the government
issues.

Personally, I agree with John Mauldin, again, with regards to
generating a significantly higher return than he would otherwise
receive from the powers that be.

"Now I will suggest a heresy. The think tanks you and I
trust suggest true Social Security reform is going to
cost about $1 trillion. Privatization is not cheap,
but it lets our kids have a chance to retire in a
world where the government will not be bankrupt and
gives them actual cash for their retirement. Guarantee
the current system for those who are older or want to
stay in the system. (Hey, I'm 55 and would opt out in
a heart beat if I could. Give me 20 years of my SS
payments and see what I turn it into. A lot more than
I would get from any future SS payment. But then
again, I am not planning on retiring.)"

As it is, the federal government has ignored Einstein and failed to
utilize the greatest mathematical discovery of all time, compound
interest, instead they are content with robbing Peter to pay Paul less
than they robbed from Peter.

Now, because I like Mark Cuban and the job he's done with turning
around the Mavericks, I will quit picking on him and forward a
solution that nobody in the mainstream is discussing.

The basic idea behind this proposal is that by selling large tracts of
federally owned land, much of which has either oil or natural gas
under it, there would be no question as to how to pay for the
"transition costs" that everybody is all fearful over.

As for the so-called "transition costs", there is less to this
argument than is currently implied by those who fear the changes:

"The "transition cost" is not a real cost. It is an
accounting change, in which off-balance sheet
obligations of the government (the promises that are
made to you under the current Social Security system)
are exchanged for on-balance sheet debt. I have used
the analogy that Social Security's unfunded
liabilities are like a worn-out roof, and
privatization is like paying for a new roof. If you
were not counting the worn-out roof as a liability,
then it may appear that there is a "transition cost"
to fixing the roof. In fact, the cost of not fixing
the roof is just as high or higher.

"On the other hand, using debt rather than payroll
taxes to fund current beneficiaries would have one
important real effect. It would shift the overall tax
burden away from payroll taxes and toward general
revenues, which means primarily income taxes. Thus,
the transition toward privatization would make the
funding of Social Security more progressive, meaning
that relatively more burden falls on the rich and
relatively less falls on the poor. In that regard, it
is somewhat surprising that the Left opposes
privatization and the Right supports it."

In other words, instead of having Enron style off-balance sheet
arrangements to pay us all back, the government would be forced to
admit exactly how much it has borrowed. This alone would do more for
openness of government than almost any other federal statute,
including the Freedom of Information Act!

In summary, if I were Bush's advisors or actually a member of Congress
this is how I would synthesize all of these ideas into a reasonable,
realistic opportunity for everyone to succeed, without federal
meddling and with all "costs", both real and imagined, completely paid
for.

First of all, I would change the hidden portions of SS taxes from an
invisible, not on your paycheck payment, and actually include it. The
effect this would have is to instantly give everyone who receives a
paycheck a "raise" that would be itemized as a portion of their taxes,
just like all the rest of their payroll taxes. This would force all
current workers to realize exactly how much is truly being robbed from
them (Peter) to pay Paul, and as a consequence they would more than
likely demand that this additional percentage be returned to them for
their own investing purposes.

This would instantly increase the percentage amount that is being
discussed from just 2%, 4%, or even 6%, to nearly 8%.

Once we have increased the amount even more people will be clamoring
for the ability to self-direct the funds, because they will finally
see in black and white exactly how much the federal government is
truly dissipating through their mismanagement.

Then we begin using an online auction marketplace, Ebay perhaps, to
sell off portions of the federal lands that would raise the most
money, because of the natural resources available on those lands. The
remaining several tens of millions of acres could be sold at a fixed
price level, just like every other land rush in US history.

As long as we raise at least $2.5 trillion, $5000/acre for 500 million
acres, we should have more than enough to cover all of the "transition
costs" of making the government completely honest. At which point, to
sweeten the pot, the government could even return the difference in
such a way as to actually increase the payouts to those retirees who
choose not to opt-out of the current system.

Thus, not only do we maximize the amount that younger workers, those
under 45, would be able to invest, we increase payouts to current
retirees, we pay for all of the costs of opening up the current system
to actual public scrutiny through the so-called "transition costs",
and finally in the coup-de-grace, we reduce our dependency on foreign
energy sources by a statistically significant margin for the
fore-seeable future.

Finally, people like myself, who openly advocate investing options
that reduce commissions, fees, and other costs, will be rewarded by
the significantly larger percentage of the population who is
increasingly disgusted with exactly what is bothering Mark Cuban, all
the scams that prey on unsuspecting investors!

Truly a win-win-win-win-win method of reforming Social Security. Now
we just have to force our Congressional representatives to follow
through with true reform.

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The Special Prize Inside

Sunday, while I was driving back from Austin, I had a wonderful chat
with one of my paid Advisory Newsletter subscribers. In fact, because
of the volume of information we covered and because we had no set
topic outline, or timeframe, we ended up chatting on the phone for
nearly 2 hours.

We discussed a wide range of investment topics and I took the time to
translate the Wall Streetese that several financial account's
documentation were written in.

I didn't give her a single stock recommendation, other than to explain
several older Advisory Newsletter recommendations in a little more
detail.

I didn't charge her a dime, in fact I called her so she wouldn't have
to pay long distance charges and instead showed her how to make nearly
$2000 off existing bonuses within the Advisory service.

I never insulted her intelligence by telling her that she should
ignore other advisors' advice, or that my advice was the only advice
out there. Instead I pointed her to several different websites that
would help illuminate the processes and decisions she was seeking help
with and in a follow-up e-mail that I received Monday, she said:

"Thanks so much for your time and the wonderful
information yesterday -- my notes have notes! You gave
me some great insights, and some really helpful
suggestions with which to start more homework. For a
bit today, work is taking priority (always nice when
you do something so clients pay!) but I'll be back in
learning mode again this afternoon.

"Again, thanks for a wonderful conversation. I
especially appreciated your invitation to set up
another call ... I tend to be a bit labor-intensive
whenever I begin a new project, and it's nice to know
you're available as I move forward (I promise to try
not to overdo your time!)"

Debora, Cañon City, CO

Obviously, this is a fantastic benefit that I offer all subscribers to
the Advisory, but I now have a way for anyone else to contact me and
get some free time on the phone as well.

Ingenio has created a way for you to give me a call through their
system at a set appointment time. Alternatively, you can call the 800#
Ingenio provides and then use my extension: 1-888-INGENIO ext. 0500479

In order to generate new customers, both for Ingenio and for me, they
are willing to give you 3 free minutes of calling time, if you have
never used their system before.

Ingenio also allows me to give you up to 5 more free minutes of
calling time, which means that if you are brand new to their system,
you can place a 15 minute phone call for 1/2 off.

My regular rate comes out to well over $100/hr., but you will get
those first 15 minutes for just $18.

Once you have called me and used the initial 8 free minutes, I will
continue to send you free minutes for any followup calls you may wish
to make. That way if you have any related questions, you won't feel as
though I've dumped you once we've completed the initial consultation.

Additionally, because I don't want you to have to pay for dead phone
time, I have set it up so that you have to request an appointment.
I've done this so that in the request you can state what it is you'd
like to discuss, and thus allow me an opportunity to be properly
prepared for your phone call beforehand, eliminating possible research
time and ensuring that we both have all the documents we might need
readily available for quick reference.

You can go ahead, register for an Ingenio account right now, and set
an appointment to talk with me immediately.

Or, you can wait until I send you your free 5 minutes by e-mail.

Ingenio does have limits on the number of people I can send
invitations to at any one time, but you will all have received an
invitation by the time I publish the next issue.

Once you have registered, you can spend your free minutes with any of
the experts on Ingenio, but the 5 minutes that I'll be giving you are
only good when calling me. While subscribers to the Advisory
Newsletter do not need to register for Ingenio as they can arrange
free phone consultations with me at any time, but that doesn't mean
that you may not want to use their services for other Ingenio Experts.

Finally, an update on another website that I've mentioned before. As a
comparison there is a guy out there who offers phone consultations
regarding your portfolio. The problem is he charges $500 every 3
months, he doesn't have regular weekly or monthly updates, there is no
public, online database of the stocks he's invested in and their
current returns, and finally his Yahoo website hasn't been updated
since Nov. 26th!

While he claims to be giving advice based upon his mom's retirement
portfolio, just as I am doing, there is no comparison in terms of
breadth of services offered, or value for your money, when you compare
the 2 of us.

To sum up, you can call me through the Ingenio system for 15 minutes
and pay just $18, or...

you can subscribe to the Advisory Newsletter, receive free phone calls
for an entire year, a pair of free airline tickets good anywhere, and
a $421 tax deduction on your 2004 taxes!

All that is worth easily 10 times the cost of a year's subscription,
and we're not even counting any possible stock gains!

Investments good for my mom and you,
Andy Prior